[Congressional Record Volume 145, Number 92 (Friday, June 25, 1999)]
[Extensions of Remarks]
[Page E1411]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


            THE SMALL BUSINESS LIABILITY REFORM ACT OF 1999

                                 ______
                                 

                          HON. JAMES E. ROGAN

                             of california

                    in the house of representatives

                         Friday, June 25, 1999

  Mr. ROGAN. Mr. Speaker, I rise today and with several of my 
colleagues from both sides of the aisle to introduce the Small Business 
Liability Reform Act of 1999. This legislation will provide common 
sense protection for small businesses in America.
  Small businesses in California and across the nation each day face 
the threat of burdensome litigation. One frivolous lawsuit can put a 
small business owner out of commission. In many instances, even the 
threat of a lawsuit can force a small business to settle a frivolous 
claim for more than it is worth.
  Small businesses, like the ``mom and pop'' family stores, are the 
backbone of our nation's economy. The Research Institute for Small and 
Emerging Business estimates that over 20 million small businesses in 
America generate 50 percent of our country's private sector output. We 
must protect their right to grow and free them from the threat of 
frivolous litigation.
  Mr. Speaker, every dollar a business spends on litigation is a dollar 
that could be spent to expand small businesses, provide more jobs, 
improve employee benefits, and strengthen our economy.
  According to a recent Gallup survey, one in every five small 
businesses decides not to hire more employees, expand its business, 
introduce a new product, or improve an existing product because of the 
fear of lawsuits.
  Products sellers--like the corner grocery store--incur high legal 
costs when they are needlessly drawn into product liability lawsuits. 
Today a business such as this, which does not even produce the product, 
can still be sued for product defects. While the product seller is 
rarely found liable for damages, it must still bear the cost of 
defending itself against these frivolous suits. This unfair treatment 
of small businesses must stop.
  The Washington Legal Foundation reports that punitive damages are 
requested in 41% of suits against small businesses. Is it possible that 
such a large number of small businesses are engaging in egregious 
misconduct that warrants a claim of punitive damages? The National 
Federation of Independent Business reports that 34% of Texas small 
business owners have been sued or threatened with court action seeking 
punitive damages. This hinders business and punishes the backbone of 
our economy.
  My bill will ensure that small businesses will be protected from 
frivolous suits by limiting the amount of punitive damages that may be 
awarded against a small business. In most civil lawsuits against small 
businesses, punitive damages would be available only if the claimant 
proves that the harm was caused through a conscious and flagrant 
indifference to the rights and safety of the claimant. Punitive damages 
would also be limited to the lesser of $250,000, or three times the 
compensatory damages awarded for the harm.
  Second, this legislation limits joint and several liability so that a 
small business owner would only be liable for non-economic damages in 
proportion to his or her responsibility for causing the harm. If a 
small business is responsible for 100% of an accident, then it will be 
liable for 100% of non-economic damages. But if it is only 70%, 25%, 
10%, or any other percent responsible, then the small business will be 
liable only for the proportional responsibility they share.
  Mr. Speaker, the examples of unfairness to small business are just as 
shocking. In one instance, a product seller was dragged into a product 
liability suit even though the product it sold was shipped directly 
from the manufacturer to the plaintiff. In the end, the manufacturer--
not the product seller--had to pay compensation to the plaintiff. 
Unfortunately, this was after the product seller had been forced to 
spend $25,000 in court expenses--$25,000 that could have been used to 
expand the business or to provide higher salaries.
  Mr. Speaker, the time for small business legal reform is now. Let's 
remove the threat of unnecessary litigation and help small businesses 
focus on what is really important--keeping this economy growing. I ask 
my colleagues to support this important bipartisan and common sense 
business legislation.

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